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How to manage your money in 4 simple steps

Money management is as crucial as earning money. It does not only involve math but also needs a sacrificing and adjusting mindset from your side. It isn’t all tough though. Here is how you can do it in 4 easy steps.
How to manage your money in 4 simple steps
Money management is a future-oriented approach where the spending is reduced and investing increases for the future. But while it might seem like a lot of work, once you're on track, you have nothing to worry about financially.
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How you manage your money sets your expenses and savings on track. Money management is a comprehensive plan which can help reduce miscellaneous spending and enforce how you manage your money according to your goals.

Money management sets your expenses and savings on track. It is a comprehensive plan which can help reduce miscellaneous spending and also enforce the usage of money according to your goals.

This is a future-oriented approach where the spending is reduced and investing increases for the future. However, creating a savings plan is not a trifle and can send you into a frenzy. Hence, it is best to consult the expert before starting with the process. So, here are some easy tips that will help you gain control of your money!

Make a list of your finances

Money management is as crucial as earning money. It does not only involve math but also needs a sacrificing and adjusting mindset from your side.

The first step is to make a list of your current status it should include information like:

  • Are you dependable on paychecks?
  • Do you have emergency savings?
  • Are you spending too much?
  • Financial jargon frightening for you?

Once you have answered these questions genuinely, you will find out the leaking parts in your financial plans. Your previous mistakes don’t have to define the future, so venture on this journey with a fresh perspective.

Create a roadmap

Here are the steps to execute your plan flawlessly:

Create the budget

You can follow a certain system when it comes to how you manage your money that will be favorable to your income, namely the 50/30/20 plan. In this plan, 50% of your income is contributed towards your needs, 30% goes into your wants, and 20% goes into savings. 

If this doesn’t suit you, there are many other budget systems that you can follow, including the cash envelope system or use budgeting applications. Now this will keep your finances in the lane.

Monitor your spending

By monitoring expenses, you will be aware of where your expenses flow. This will help in fulfilling the goals and adjust your expenses.

When you are conscious of your spending habits, you will find more avenues to invest and save. To do this, you can change up your habits, negotiate bills, and aim for the long run. Saving should not be deemed as a responsibility but a lifestyle. To enforce a saving habit you should utilize coupons, DIY hacks, coupons, and be a little finicky about buying things.

Use spending and savings accounts

Another great alternative to save your money is to allow a fixed amount of money to spend and segregate it from the emergency fund. This will save you from a hassle and keep your money safe from any extravagant wants. So, if you want to save for a vacation or new hours, keep those funds in different accounts.

Get rid of debts

Being prudent about paying what you owe will help you get debt-free easily. It is best to prioritize the highest debt with the highest interest rates. Then move down along the way until every installment is fulfilled. Here is how you can pay off your debts.

Develop good habits

The amount of credit determines the interest or rates that you will be paying, and this will also dictate how your financial life will be shaped. Good credit habits also dictate your credit score and help you in acquiring loans for phone plans, insurance, or apartment.

The two important factors to focus on here are credit utilization (how much credit you are utilizing). Pay all bills on time, and your score will stay tip-top. It is recommended to utilize only up to 70% of your credit limit.

You should also invest for a secure future by investing in IRAs, and 401(k) and compound interest will do the rest. Your end goal is stability and financial freedom.

Save judiciously

Money management is not just about regulating your spending habits. Financial freedom is acquired by being capable of living a good life in both the short term and the long term. This includes 4 easy steps on how you manage money:

Save

You should save at least expenses worth 6 months and have them at your disposal at all times, in case of any unfortunate circumstances. You can start small by starting with a small amount of $500 and then increase it with time.

Invest

Investment helps to grow the money, start contributing to 401(k). You should contribute a viable amount to get the maximum return.

Slay your debt

Debt lingers on the weight like a burden, be it a loan or a credit card bill. Make your monthly deposits on time and maintain your score. If you have some additional funds, put them towards some debt payment.

Be consistent

Getting off the financial train is common for many people. Make your budget flexible. So, it doesn’t suffocate you. Navigating through financial jargon can be daunting, but you can keep working towards your plan to grow gradually. If you are determined, your financial plan will harbor results in the long run.

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Author

Picture of Devanshee Dave

Devanshee Dave

With over 4 years of experience in financial writing and a master’s degree in mass communication & journalism, Devanshee is currently preparing for her CFA (Chartered Financial Analyst) exams. In her spare time, she likes to dance and learn about cosmology, astronomy and anything that can expand her knowledge from the big bang to the big crunch.

Editor

This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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